Thai government reaches possible breakthrough in rubber crisis

BANGKOK (Reuters) - Thailand's government said on Friday it had reached a deal with most rubber farmers in the country's south demanding greater state support for rubber prices, signaling a breakthrough in a two-week long protest.

"Most protest leaders agree to our pledge to help push prices up to 90 baht per kg but there is a small minority who do not see eye-to-eye," Thawat Boonfueng, deputy secretary-general to the prime minister, told reporters on Friday.

The government has asked for 10 days to come up with measures to help support rubber prices but said it would not intervene directly in market prices. Protest leaders had earlier demanded 100 baht ($3.10) per kg.

Protesters in Cha-uat district of Nakorn Si Thammarat province, one of the main protest sites, began to disperse following the deal between their leaders and the government.

Others said they would not accept anything less than 100 baht per kg.

"We are giving the government one week to re-think their offer. If they don't meet our demands, we will march on city hall" said Amnuay Yititham, a protest leader.

The populist government of Prime Minister Yingluck Shinawatra faced pressure on Friday to end the demonstration after violent overnight clashes between riot police and a group of protesters who hurled rocks and bottles filled with an acidic liquid.

Police fired tear gas to disperse a group of protesters in Prachuap Khiri Khan province on a main road from Bangkok to the southern beach resort region of Phuket. At least 21 policemen were injured, authorities said. By mid-morning Friday, protesters had dispersed.

"Acid and rocks were thrown at police, leaving one officer with a serious injury. Orders were issued to use teargas after a group of youths, who were not part of the protest, fired at police," Deputy Prime Minister Pracha Promnok said on Friday.

"The situation this morning is calm."

Thailand is the world's biggest rubber producer and exporter with around 90 percent of its output heading overseas. The protests have disrupted distribution systems and delayed thousands of metric tons of Thai rubber shipments.

Tens of thousands of farmers in the country's main southern rubber-producing region are demanding greater state support after a slowdown in demand from China and concerns over global economic growth sent prices tumbling to multi-year lows in mid-2012. China accounts for 35 percent of global rubber consumption.

They mainly support the opposition Democrat Party and have accused Prime Minister Yingluck Shinawatra of supporting rice farmers in her key north and northeastern constituencies through a rice-buying program, while neglecting rubber farmers in the south of the country.

Earlier in the week, rubber farmers blocked roads and railways and threatened to shut down 14 city halls after the government rejected their demands for price rises.

In a bid to lift prices, the government on Thursday scrapped a tax on rubber exports until the end of the year but the move failed to placate protesters.

Deputy Prime Minister Pracha and other officials on Friday flew down to Nakhon Si Thammarat, the location of a major rally site in the south, to hold talks with protest leaders.

"The Prime Minister wants this problem solved immediately so that the situation in the south returns to normal," said Pracha.

A $690-million rubber subsidy program that ended in May saw the government buy 210,000 metric tons of rubber at 10 percent more than the daily market price.

The scheme was axed after criticism that it was costly and distorted market prices and industry officials say extending the rubber scheme could cost Thailand more than $620 million.

Protesters have already shot down a government offer to give farmers 1,260 baht ($39.00) per acre of rubber plantations for up to 25 acres of land, arguing that the offer will not help support falling prices.